US House committee probes possible corruption at Puerto Rico's utility

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Dive Brief:

Members of the U.S. House of Representatives Committee on Natural Resources are demanding answers from the Puerto Rico Electric Power Authority on a range of allegations, including corruption and the mismanagement of power restoration efforts following Hurricane Maria.

Hurricane Maria devastated the island's electric grid in September, and more than 150,000 Puerto Ricans remain without power, according to the letter. The recovery effort has been troubled at every step, beginning with the selection of a small Montana-based firm to oversee a $300 million restoration effort.

Dive Insight:

Puerto Rico was already in financial straits when Hurricane Maria struck, and PREPA had $9 billion in debt. So the island was already facing steep challenges in its efforts to mount a rapid restoration campaign. But the Committee on Natural Resources' letter describing graft and corruption at the utility would be particularly disturbing in light of the numbers who remain without power, if found to be true.

The letter begins by describing one incident where utility officials were allegedly paid $5,000 and given entry tickets valued at $1,000 each to restore power to "exotic dance clubs" ahead of schedule. And PREPA officials reportedly restored power to their homes before doing so at critical infrastructure, such as San Juan's airport.

"In addition to betraying the public's trust, improper out-of-sequence power restoration has been associated with at least two fires and complicates scheduled power restoration operations," the letter says.

The letter cites one reason recovery has been delayed: a lack of materials. The Army Corps of Engineers identified material and equipment shortages as "the biggest challenges to restoring electricity on the island."

The letter describes a "raid" by the Corp of Engineers and the Federal Emergency Management Agency on a utility-owned warehouse. Known as "Warehouse 5," it was not included in PREPA's computer inventory and contained "critical material" needed for restoration that the utility had not distributed.

"PREPA's explanations for Warehouse 5 and its inventory have been contradictory and, frankly, inadequate," the House committee's letter says. Equipment from the warehouse has been distributed to contractors on the island. The committee directed Gonzalez to respond by no later than March 26, preferably sooner.

"Billions of taxpayer dollars are pledged to help Puerto Rico," the letter says, "but a lack of faith in Puerto Rico's institutions remains a major barrier to recovery."

That lack of faith helped lead intense scrutiny of PREPA's contract with Whitefish Energy in the immediate aftermath of Hurricane Maria. The contract for the $300 million deal included language that precluded government agencies from auditing the agreement, but has since been canceled.

Six months later, questions remain about how the tiny Montana-based firm landed such a lucrative contract. Huffington Post reports there were indications earlier in 2017, before it was selected to help Puerto Rico recover, that the company's finances were not strong.